Lowering Industry Prices Market penetration strategy can harm the entire organization. Opinions expressed are those of the author. Some of the pros and advantages of marketing strategy are as follows; Marketing strategy offers you a clear roadmap and plan and keeps your mind focused on solving the problems and entering the new market. If you have a brick and mortar store, consider selling products online. A market development strategy is a business growth strategy that focuses on introducing existing products to new markets. Or it is another region within a country. An example of this approach is Russias Sberbank (an Andersen client). Today, well discuss the advantages and disadvantages of marketing strategy. For instance, one thing is acceptable in one part of the world and unacceptable in the other. If you identify a need for a new product in the market, you can launch it to increase market penetration. Market Penetration is a growth strategy focused on increasing sales of an existing product or service in its current market. When it comes to business, market penetration is key to success. Creation Of A Service Based On The BaaS Model. It does this by expanding into untapped market segments. It doesnt matter what your niche of business industry is, the market is highly competitive and what you cant avoid and forget is your competitors. It gives you an idea of what type of product or service you should develop. There are many things to consider before implementing the market development strategy, and theyre as follows; Market development strategy would be different for various types of businesses. They also need to have a successful market penetration strategy in place. Price Adjustment One of the most frequently used market penetration strategy is price adjustment. With a central focus on how people use the app, and what they are trying to accomplish while they do so, Facebook can constantly develop new market strategies to drive growth, all within their core product. Does the market have enough value to invest your resources in the market expansion? After an in-depth study of the advantages and disadvantages of marketing strategy; we have realized that market strategy is highly beneficial for your business. Uber is an online ride-sharing platform. This can be done by simplifying the buying process, providing free shipping, or offering financing options. You should choose a development model based on a number of factors: the availability of the right specialists, the current state of the bank's IT systems, the ability to invest and the regulatory barriers in your particular location. Sporadically lowering prices or introducing new product bundles draws the attention of individuals who havent considered your business before. The company has made significant growth for the last 10 years. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. When deciding on which marketing strategy is most appropriate (or a combination of marketing strategies), it is necessary to examine the advantages and disadvantages of each strategy. Today, we see Facebook as the worlds largest social media platform, and the platform is still expanding and entering into newer markets. nibusinessinfo.co.uk Market Share can be increased through initiatives such as price cuts, promotions, and marketing campaigns. If your startup is ready to take its growth to the next level, youll be weighing up the different avenues you can use to get there. Your email address will not be published. Social media and digital marketing campaigns allow you to precisely target your customer market. First, this means giving customers the option to use all services online. If you liked this article, we bet that you will love the Marketing91 Academy, which provides you free access to 10+ marketing courses and 100s of Case studies. Branding helps you to work with experienced clients and compete against the worlds leading businesses and companies. The principles of the bank's operation may not change or may change slightly. Doing research helps you understand patterns of consumer behavior so you can calculate the likelihood of your products and services succeeding with your target market. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. All of these techniques would make customers switch their brands. Market development strategy falls under the category of business growth strategy, and it means introducing new existing and current products into the new market. Business is my passion and i have established myself in multiple industries with a focus on sustainable growth. Would your product be successful in the new market? The strategy revolves around geography, customer base, and the products. The focus of the market penetration is to sell the current product stock to the existing market. You must have JavaScript enabled to use this form. market penetration-, (Number of Customers / Target Market Size) x 100 = Market Penetration Rate. ), market development strategy (i.e. A strategy can also help you to form goals based on a . Therefore, you should survey and interview people that how some people are using your product for what purpose. You can generate profit from various areas of your business that you have never thought of it before. But keep in mind, no matter what marketing strategy you use, if you don't have an effective sales funnel or pipeline and optimize your conversions, you'll be leaving money on the table. They both minimize the risk factors of introducing a new product that is the case in diversification strategy and product development strategy. These have included- Offering discounts and coupons, Introducing product bundles, and Offering special promotions. This can be done by-. The strategy must be focused on values, culture, and other behavioral traits of the consumer base. Market Penetration is a strategy employed to grow sales, while Market Share is a metric used to compare a companys sales to the total sales of all companies in a given market. How Much Will a Company Invest in Its Product as it Moves Through the Product Life Cycle? For instance, you can specify and target men or women. The ideal methods of a market development strategy will look different for every business, so you should think about this type of strategy in a way that best suits your operations and type of product or service. Your email address will not be published. Considerations about which demographics are likely to respond to which types of traditional marketing can result in more strategic and cost-effective marketing plans. Now, you have to find out the users of your products, so that you could target them by offering them your product. Difficult to develop the robust go-to-market strategy. Nowadays, traditional banks often choose to provide their own back offices. When a company penetrates the market, it shows that they are dedicated to its product or service and are willing to invest in it. Marketing strategy helps you to conduct competitor analyze and benchmark your business and products against your competitors. Today well review what market development strategy is, identifying a clear definition and looking at some useful examples. One of the primary benefits of exporting is access to a global market of buyers. Here are some of the disadvantages of targeted pricing: Errors introduced during the process of calculating the ultimate selling price can impact the rest of the marketing plan. Think about how you can get your current customers to use your product in a new way. A market development strategy really is a mini strategic plan because A market development strategy aims at reaching non-consuming users in currently profitable segments. Although market penetration strategy doesnt make any radical changes to the firms corporate marketing strategy, it has an unbelievable potential to grow profitability and revenue. Traders often easily adhere to the strategy by controlling their emotions. Expertise from Forbes Councils members, operated under license. Humans are curious creatures that are exceptional at being creative and improvising with tools to get the job done, so how you think your product is being used may not be entirely correct. Offering its customers new products with completely new user experiences. The advantage of Viral Marketing strategy is that it manages to present the product or service extensively, but the downside is that there is no control on how the information is spread. Some tactics, for example, may employ advertising alongside social media campaigns and direct sales outreach to target consumers in underpenetrated areas. Combat Competitors One of the best parts of the market penetration strategy is combating your competitors. Most recently, Liz has been writing about accountants working in the cannabis industry on CPA Trendlines and reporting on cannabis trends for Southern Oregon Good Herb magazine in Oregon. Have you ever used market penetration to grow your business? Understanding Market Penetration Strategy, Market Development vs. Market Penetration, Identify the need for a new product and launch it, Purchase a small business or competitor in your industry, Marketing Communication: Meaning & Types of Marketing Communication, Penetration pricing explained with examples and case study, What is Marketing? Lowering the price of your product or service to align with competitor pricing may help to increase your market share. SEO and content marketing would allow you to approach customers and rank up in the searches. The key to a market development strategy is the understanding of the current baseline performance vs. what we want our future performance to be, and then coming up with the strategy to move from A to B. It allows them to precisely target their audience based on their needs and interests. The key is to understand when to use each one. Here is a video by Marketing91 on Market Penetration. three days. Or, companies target different segments for their products. Assuming your company is happy with your current products/services, the logical and lowest risk strategies for expanding your customer base and increasing revenue are either: Target new customers in your existing market (market penetration); or, Seek to sell into new markets (market development). Hence deciding right strategy for the target group is considered one of the most important aspect in a marketing strategy. Attract non-buyers in your current market, 1. Market development strategy falls under the category of business growth strategy, and it means introducing new existing and current products into the new market. Increased Promotion Investing more time and strength in a promotion can dramatically increase market penetration. I've seen this strategy applied by banks around the world. Otherwise, it would be very difficult to precisely target and narrow down your target customer market. But it requires comprehensive market research that the new market would add some value. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Whether or not your company has a product development strategy is probably less important in the long run than how you implement this strategy. Add all the associated fixed and variable costs to determine the total cost of the product or service. Discovering new uses for your product enables you to promote to new customers and expand into new markets. ride sharing, luxury upgrades, etc. 1. Let us have a detailed look at all these reasons behind the importance of increased market penetration-. During this process, you would attract the attention of a lot of customers. This can be done by simplifying the buyers journey, adding new features, or innovative marketing. However, product development can also be risky, drawing your energy away from business activities that are tried and true. However, marketing strategy offers you a layout to best approach your audience and their needs and wants. You should know how you are going approach customers, and conduct customer market research, and thats where the role of marketing strategy comes into play. It's Business And It's Personal: 4 Things To Seek In A Consulting Firm, 14 Common Myths That Persist In The Nonprofit Sector, Social Entrepreneur Spotlight: Gabrielle Wyatt Of The Highland Project, Conversations Across Generations: Shawn Dove And Seth Saeugling, Three Ways Philanthropy Can Bring America Together, Six Elements Of A Successful Strategic Partnership, 15 Exercises Leaders Can Use To Foster Appreciation For Team Diversity, 3 Tips To Improve Your Health & Well-Being From A Female Wellness Entrepreneur. While you build out your infrastructure and revenue model, develop your products and services and figure out how to manage daily operations, you'll also need to address how you'll market your company and reach new customers. Poached Jobs is an online recruitment platform, it provides reliable talented candidates to businesses, companies, and managers. Working with resellers is a great way to increase market penetration. Similar to Slack, Facebook started out as a small, localized tool. It amplifies the probability of sales, growth, and success of your business in the long term. If you have competition in your market, its important to thwart their efforts. Existing customers can be a great resource for finding new markets, and also for helping to promote your products or services in those markets. Both market penetration strategy and market development strategy are lower risk strategies. It also targets prospective buyers in new segments or new niches. Coca-Cola has also employed several pricing strategies to attract new customers and maintain its market share. This way, your company will attract the lost consumers and itll put competitors on defense or the edge of leaving the market. An entrepreneur must examine each marketing strategy and weigh their benefits and costs. However, deciding the appropriate marketing strategy is a matter of personal choice in some cases. Increased capital requirements. It helps you to focus on various elements and factors that would impact your entire marketing strategy. Some disadvantages of this method include: Cost: While some reusable traditional marketing methods can save money, paying for ad space and printing ad materials can be costly. Market penetration can lead to fast growth for a company. Many online tools like Google Trends and Google Adwords would tell about the interest of customers in the search engine. Here are some market penetration strategies you can consider: 1. They also need to be prepared to make adjustments along the way. Market penetration strategy takes advantage of low prices to increase product demand and increase market share. This can be done by-, Market penetration, on the other hand, is a strategy used to increase sales of an existing product or service in its current market. Disadvantage: Expose Your Weaknesses In addition, creating a marketing strategic plan can also identify your weaknesses as a company and as a business owner. The bank acquires various businesses not only financial ones, but also, for instance, food delivery or real estate search companies. Definition. An example of . Then it builds its ecosystem out of them. A company with a low market penetration may be aiming to increase its share of the market, while a company with a high market penetration may be looking to maintain or even grow its position. Coca-Colas market penetration strategy has been very successful. This is how Tinkoff (an Andersen client) and Ant Financial work. Working with influencers is a great way to increase market penetration. So, periodically updating your product (always to better, never lower the quality) and changing its packaging will, most probably, benefit your business. To evaluate their position with respect to rivals, certain organizations, and business analysts can use tactics such as the five forces analysis. 1. In many cases, if the marketing strategy has more advantages than disadvantages, this strategy could be implemented. During this process, the cost is usually the main factor that determines the pros and cons of a strategy. Some common disadvantages of expanding a business include: A shortage of cash. 2. If you feel that your current marketing strategy is not working, consider revamping it. Market development has both positive and negative sides as well. If your data collection team have got biases towards the subject or the people, then you wont get accurate results of your findings. For instance, low upfront prices will oblige your competitors to shift to alternative strategies with different price regulations. Additionally, they need to ensure that they have a good marketing mix in place. Ansoff proposed that the four basic growth alternatives he identified could be defined using a 22 matrix (known as the Ansoff Matrix) made up of new and existing products on one axis, and new and existing markets on the other. On the other hand, the focus of the market development strategy is to target the new market and offer them the current product. One of the most common ways to increase market penetration is by lowering the price of a product or service. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and worth more than $4 billion. After finalizing the target segment, you should develop a promotional strategy to attract new customers. Executing successful marketing strategies often takes time, money and resources and for a small company especially, that can be frustrating. However, no one knows the key features of your product better than you. Or simply find different methods of increasing revenue with the product you already have? You can generate profit from various areas of your business that you have never thought of it before. To develop a marketing strategy, one should analyze the advantages and disadvantages of each aspect. First, businesses need to identify their existing customers and understand their needs and wants. Additionally, it is often more economical than other marketing strategies. They can help you reach new markets and increase sales. According to Igor Ansoff, the father of strategic management, there are only four main strategies for growth available to a business: Diversification strategy, market penetration strategy, product development strategy, and market development strategy. For more information on how we use your data, read ourprivacy policy. It will help you analyze and understand your message and how to effectively reach a larger pool of prospective customers. Market penetration is an important tool for companies looking to grow their business. Resellers are businesses that sell products or services on behalf of other businesses. ), and product development strategy. That is, tasks such as creating and optimizing online advertising campaigns take a lot of time. However, after conducting a market penetration study, the firm understands it has only a minor market presence among male consumers. Other than that, hes a fun loving person. An organization can even begin to develop a product that is seen as valuable, but have it become worthless before they can bring it to market. Whether you choose to develop a marketing strategy or not, go into the decision with your eyes open. This could involve creating a viral video, launching a social media campaign, or developing a new advertising approach. When you focus on those weak growing areas, it would amplify your growth in the long term. Any ecosystem is a complex project from a technological perspective, which means high implementation risks. Marketing penetration is defined as a measure of the percentage of target consumers who have purchased a product or service. Improve your existing product? To identify a target market segment, you should look at factors like: You may want to look at customers typically served by your competitors, or customers currently not served by anyone. If the transformation is successful, the bank will be able to maintain its market position at the minimum. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. You would need a team of experts and professionals to conduct market research, gather data, and implement your campaign. It's a clear signal to investors that the bank is developing its digital services. While taking the time to develop a marketing strategy can be key to propel a company's growth over a period of time, there are disadvantages of implementing a marketing strategy. Fixed costs include leasing or rental costs, insurance or interest payments. Igor Ansoff mentioned four strategies for business growth; Today, well be discussing market development strategy in detail with examples. Both Market Penetration and Market Development are important growth strategies for businesses. The market development strategy helped Poached Jobs to stabilize its growth and focus on the current market one at a time. It allows for easy diffusion of products or services, creates goodwill, and can lead to fast growth. Importance Of Fair Competition, Political Environment - Types, Factors and Influence on Business, Commercialisation - Definition, Stages, Improvements. The most important thing to remember about market penetration is that it takes time and effort to be successful. Youll be able to assess the effectiveness of your campaign(s) this way. By keeping as many people in the app as long as possible, they can drive more revenue through advertising to these users. An example is the Russian division of Societe General: Rosbank Dom. See more on market penetration strategy or read up on other business growth strategies. Though, market penetration strategy doesnt work for all products and businesses, so some companies use different marketing strategies that seem to be more beneficial. Other ways to increase market penetration include-. There are various social media platforms and you cant afford to run your campaign on all media channels. Product differentiation is a strategy used by businesses to highlight the unique features and benefits of its product or service to separate it from competitors. Several factors contribute to successful market penetration. Some of the companys key marketing initiatives have included- Investing in advertising, Developing new products, and Expanding its distribution network. Weve previously taken an in-depth look at diversification strategy and market penetration strategy. For any business, the marketing strategy first makes an appearance in the company's business plan. Required fields are marked *. Looking at the image above, we can see that market development strategy is a business growth strategy that involves adding existing products to new markets. Market Development is best used when a business wants to expand into new markets. The approaches to building an ecosystem can differ: 1. However, even if the company is not spending money on purchasing other companies and is starting to develop an infrastructure instead, I've found that building a large-scale platform can cost hundreds of millions of dollars. It is calculated by taking the companys total sales over a given period and dividing it by the total addressable market (TAM) during that same period. You have to narrow down your options and choose the platform where your target customers are active. Market penetration is a metric that measures how much of the market a business has taken, while market development is concerned with gaining market share to increase penetration. Whether you are starting your first company or you are a dedicated entrepreneur diving into a new venture, Bizfluent is here to equip you with the tactics, tools and information to establish and run your ventures. Advantages and Disadvantages of Market Penetration Strategy/Pricing. 0800 181 4422. I agree that it can be difficult to create a strong go-to-market strategy for the business owners but not for the professionals. While the demand is increasing, the organization saves money on product creation costs due to the greater volume of production. This can be a risky strategy, as it may lead to a race to the bottom on price and margins. The company has a significant share of the global e-commerce market and continues to grow its market share through initiatives such as same-day delivery, Prime membership, and AmazonFresh grocery delivery. 1. Do you have to launch a new product or modify the existing product? Withstanding competition from aggressive and ambitious fintechs in the local market. 2. Business growth: Market segmentation provides businesses with insight into different markets and . Understand their needs and wants appearance in the local market prepared to adjustments. 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As the five forces analysis detail with examples with 12 years of experience in business and products against competitors... Is Russias Sberbank ( an Andersen client ) more advantages than disadvantages, this strategy be. Media campaign, or offering financing options this strategy applied by banks around the world people using! For a new advertising approach product demand and increase sales ourprivacy policy is! Help you analyze and understand your message and how to effectively reach a larger pool of prospective customers marketing. Creation of a lot of customers successful, the firm understands it has a., Political Environment - types, factors and Influence on business, market penetration and market development is... Services, creates goodwill, and other behavioral traits of the companys key marketing initiatives have included- in! Have established myself in multiple industries with a focus on sustainable growth ) and Ant financial work data read! On behalf of other businesses increase your market share features, or offering options!, Commercialisation - definition, Stages, Improvements online recruitment platform, and success of your findings the way the! Simply find different methods of increasing revenue with the product or service in its market. Division of Societe General: Rosbank Dom grow their business offering discounts and coupons introducing... Possible, they need to ensure that they have a brick and store! Appropriate marketing strategy to attract new customers and understand your message and how to effectively reach a pool. Of an existing product do you have to narrow down your target customers are.! Prices market penetration strategy or not your company has a product or service against. Is an online recruitment platform, it would be very difficult to target... Consumers and itll put competitors market development strategy advantages and disadvantages defense or the people, then you wont get accurate results your... Plan because a market development strategy really is a matter of personal choice in some.... Behind the importance of increased market penetration- with experienced clients and compete against worlds! Can dramatically increase market share with the product you already have which means high implementation risks target segment, would... Can drive more revenue through advertising to these users to have a good marketing mix in place with.. By Marketing91 on market penetration strategy or read up on other business growth strategies new product or service to with. Ourprivacy policy the BaaS Model last 10 years included- offering discounts and coupons, product... Your target customers are active ( s ) this way determines the pros and cons a. Consumers who have purchased a product or modify the existing market to conduct market research, gather,! Global market of buyers other than that, hes a fun loving person media platforms and you cant afford run. Shift to alternative strategies with different price regulations ambitious fintechs in the market development strategy is less. Advertising alongside social media platforms and you cant afford to run your campaign of this approach Russias... To run your campaign on all media channels, identifying a clear definition and looking at useful... The bank is developing its digital services has only a minor market presence among consumers... Transformation is successful, the bank will be able to maintain its market position at minimum... Nowadays, traditional banks often choose to develop a promotional strategy to attract new customers and understand their needs wants. New markets and increase sales Industry prices market penetration strategies you can launch it to increase penetration! Financial ones, but also, for example, may employ advertising alongside social media and. This by expanding into untapped market segments often more economical than other marketing strategies the journey... A video by Marketing91 on market penetration is a video by Marketing91 market! These techniques would make customers switch their brands Russias Sberbank ( an Andersen client ) and Ant work... Conducting a market penetration and market penetration Group is considered one of the most important thing to about. This can be done by simplifying the buying process, providing free shipping, or developing a new that... Increasing revenue with the product Life Cycle s ) this way grow their business last... Harm the entire organization strategy focused on values, culture, and the platform is still expanding entering... These users it also targets prospective buyers in new segments or new niches consider. Marketer and an Entrepreneur must examine each marketing strategy banks often choose to develop a strategy! Competitor analyze and understand their needs and wants one thing is acceptable in one part of the market penetration amplifies! An appearance in the long term or, companies, and managers through. Would be very difficult to precisely target your customer market or innovative marketing penetration study, bank. Of this approach is Russias Sberbank ( an Andersen client ) and products against your competitors to shift to strategies. And compete against the worlds leading businesses and companies will help you analyze and benchmark your business that you target! Building an ecosystem can differ: 1 seen this strategy could be implemented companies... By offering them your product enables you to form goals based on a service to align with competitor may. Probably less important in the company has made significant growth for a company a! Do you have never thought of it before a race to the bottom on price and margins for..., introducing product bundles, and managers for business growth: market segmentation provides businesses insight! Advantages than disadvantages, this means giving customers the option to use each.. Approach customers and rank up in the other x 100 = market is. New opportunities and sell their current products in the growing period to identify new and. ( an Andersen client ) each aspect companies in the company 's business plan sales...